What are the biggest mistakes people make starting up a lawncare business and what can do about them? Here's my take. There may be some more obvious ones I've left out, but these are the ones that really come up on my radar. The ones that have affected me the most during my 20 year tenure at the helm of LaVoie's Landscape Mgmt. Inc.
I think that debt can turn a mission of joy and enthusiasm into one of sleepless nights and fear if not managed properly. *It's SO tempting to have that new efficient piece of equipment that promises to save you time, make you more money and get you home before the sun sets.
The answer to how much debt is too much debt will vary with your temperament, financial situation and business plan. *In general, I think you should have your "debt to equity ratio" be no more than 50%. *Many Wall Street firms use this as a "maximum" debt level for a healthy company and you can to. *To determine your DE ratio, simply add up everything you "have"(assets) and also total everything you "owe" (debt). *Subtract what you owe from what you have. That's your "equity". Your equity is what's left after debt, and it's another loose term for "net worth". * We're dealing strictly with business here though, so don't include anything "non business" in your equation. Here's the formula:
Assets Minus Liabilities = Equity
Debt divided by *Assets = Debt to Equity (DE) ratio
An example: You have $10,000 worth of equipment and you owe $3,000 on it.
That leaves $7,000 in "equity" and $3,000 in debt. To get your actual ratio, divide the debt by the assets:
3,000 / 10,000 = .3 or 30%. *- this gives you the debt part of the "debt to equity"
That's a great DE and you won't get in trouble with that! Your equipment will depreciate, but most likely not faster than you're paying it off.
Vow to keep your DE less than 50% and debt should NEVER be a huge worry for you. *Anything more puts you in the "neediness" stage that I talk about throughout the material and invokes the "law of attraction". *Does the idea of "no debt" make you feel warm and fuzzy? Then that's what you should vow. *No debt whatsoever. *Now many financial experts would scream bloody murder that you MUST have some debt to "leverage" your business, and if you can borrow money at 5% and earn 12% more profit ... and so on. *These are all valid points, but remember,
Technician Vs. Business Man
Most of us got into lawn care because we knew how to mow lawns or had worked for another landscape outfit and gained knowledge that way and decided to hang our own shingle. Not all, but most. *When you get into business, the actual paperwork, taxes, strategic planning and financial reports are a vitally important part of the equation. *The "lawn care business" needs both the "lawn care" and the "business" to survive. *Make sure you at least know what basic financial reports are and how to use them. *Take a course or two. There are MANY green industry resources out there now that were not available or cost thousands even a few years ago. Make sure you know the profit and loss, the difference between accrual and cash accounting, a balance sheet, your debt to equity ratio and what it costs you "per man hour" to operate. Also, discover as much "piece data" as possible. How long does it take to edge a bed per foot? Spread a yard of mulch, mow a quarter acre lawn or spread and seed a yard of loam?
Too big too fast
So if you're a true male like me, you'll be salivating and grunting and fantasizing about all the "KILLS" you can make, new clients to bag, landing the new shopping center they're building and offering your stock to the public in five years on the New York Stock Exchange. Cool!! Sounds like a fun and exciting trip and a sure fire way to age quickly and die broke. *Or perhaps you'll be one of the lucky ones that gets it altogether and makes a mark for himself. *Either way is ok. It's only business. It's only life. That being said, experts say that any growth over 20% will be financed by NEXT year's income. *So if you grow 20% you can handle the additional costs associated with that growth with THIS years' profits. If you grow 30% in 2007, you're going to handle 20% of it with this year's income and the other 10% with 2008 profits. It doesn't take long to see that this formula can get you into SERIOUS trouble. Grow at a 50% clip a few years in a row and you won't see any black ink for a long time! I like to take at least 3 years at any level. *I've enjoyed buying NEW equipment for US, instead of having to buy it for a new crew and make do with the old broke down equipment we're using. *Growth is like a wild horse. *It can be a great tool and move you across the prairie quickly, but if you don't control it, it will throw in a bush full of "rattlers"!!
There is only one time I personally recommend you do a "full fledged" business plan. When you need to borrow money that you CANNOT get anywhere else. *I say this because a true business plan, though a "map" to where you're going, has much information you won't really need, use or understand. I favor Marc Allen's' approach called the "one page plan". *He also recommends a slight variation from the http://www.onepagebusinessplan.com/
I suggest you read the Millionaire Course by Marc Allen to get a better feel for it, but here's the basics.
Write down your ideal scene, set five years in the future.
Write down your goals (extracted from ideal scene).
Turn your goals into positive, personal, present-tense affirmations.
Deal with doubts and fears effectively (the book provides a specific process for this).
Write simple plans for your goals on paper.
Take the most obvious first action right in front of you, and keep going from there.
So you basically write down your ideal scene, be brave and be outrageous. Then scan this document for "goals" that you can write down. Then write down specific tasks you can take to accomplish these goals. Remember, beginning has boldness! And hard work is simply a bunch of easy stuff that didn't get done when it should've!
Not defining themselves
Who are you as a company? Are you the guy who specializes in cemeteries and schools and other municipal properties? Or are you the one who takes care of that "select group" *of wealthy, particular clients who very few have the skill and patience to serve? It's SO important to define yourself FIRST or you'll have a "mixed bag" of clients and you'll make many errors in judgment as to how to serve each type. You can be general or specific, but start defining now.
We cater to middle to upper - middle class, middle to old age, particular but not "spoiled". *This is where we experience the best money, most enjoyment and greatest client satisfaction. *On the corporate side, we cater to small properties who are loyal to a company who gives great service. *We want companies that say "ok, he did our property JUST the way we liked it last year, I see no reason to ever put this property out to bid". *I stay away from companies that put their properties out to bid every year. *You MIGHT keep the job if you give "knock em' dead" service, but chances are, saving money will always win in the end. Stick with small and loyal, you'll be glad. *
DO occasionally take clients "above" your target, just not below. *Defining yourself is another way of setting your "terms". *For instance, our rate is our rate. We don't dicker. *We say HOW the work gets done, the client gets to dictate the end result. I am paid on time. I do what's best for my family, I live by the golden rule and I clean up my messes and take 100% responsibility for my life. *Notice there are no "or else's" at the end, *no "back doors". * THEN they would be called "conditions". *These are NOT conditions, they are "terms". *There is no room for any alternative and we do not give the alternative space to exist. Period. *Most of your personal terms would be the same whether you were married, single, childless or patriarch over a brood of 11. *They "define" you, and adhering to them strengthens you and compromising them weakens you.
Metaphysically speaking, when you define yourself, you invoke the great "I AM". *When you firmly define yourself, you will begin to find situations drawn to you that fit your definition. You'll get calls from the "right" clients, you'll be in the "right" place for the president of the condo association to stop and talk to you, you'll happen to be the ONLY contractor that answered his phone that day when the new homeowner next door calls. *Another way of saying this is "You get what you settle for!"